Merchant Account Query

[earthling500]

Hi guys,

I am new here so please forgive me if I have posted in the wrong section or broken any thread rules. I have been through quite a few posts in this forum but have been unable to find answers to some specific queries I have. I am based in the US and am not too familiar with UK credit card processing particulars.

I am planning to incorporate a company, however am weighing the pros and cons of doing so in the UK, Ireland or BVI. To give you a bit of background I will be selling to UK customers mostly to begin with and thereafter rest of Europe hopefully. My questions are in relation to UK card processing:

Foreign Transaction Fee
1. If I were to incorporate a company in Ireland or BVI and apply for a merchant account in the same region, would my customers from the UK that pay by VISA or MasterCard be charged a foreign transaction fee?
Ideally, I would like to avoid such charges to my customers as it is unpleasant seeing that on your bank statement. Are there any ways to bypass the foreign transaction fee issue?


Domestic vs Non-Domestic Cards
2. Are all debit/credit cards issued by UK banks treated as domestic cards by Banks/Merchant Account providers in BVI or other British Overseas Territories and Crown Dependancies?


Setting up Merchant Facility in UK
3. Would UK Banks/ Merchant Account providers consider opening a merchant account for an offshore company that is based in BVI, Ireland or any other foreign jurisdiction?

4. Would UK banks/ Merchant Account providers consider settlement into a foreign bank account or is a UK bank account mandatory for settlement purposes?

5. I imagine there would be some tax implications and reporting obligations, if I were to receive daily payment settlements into a UK bank account?


I would really appreciate input from anyone who has experience in the card processing industry or otherwise and has knowledge of the above.


Thanks a ton for your time

Victor

 

[earthling500]

Oh and I forgot to add this bit of information, all payments will be charged in GBP. So I am positive there won't be any foreign currency exchange fee, it is the foreign transaction fee that I am concerned about.

Can anyone please clarify this?

 

[Helen Wood]

Hi Victor,

I work for a Merchant Services company and can answer your first Q (1), however my job there is not a payments specialist. If you would like me to set up a call for you with one of our specialists I think you might really benefit (and they are very good at explaining things clearly and simply so don't worry!)

Anyway, as I understand it, about your Foreign Transaction Fee question, it depends on the currency you will be selling your goods in.

Both Intra/Inter transactions incur a higher processing fee (Merchant Service Charge) which you the merchant would pay in this instance. The only instance where your customers would have to pay an exchange rate is where your goods are listed in a currency which doesn’t match that of the cardholders/issuers region.

For example: If the goods you wish to sell are listed in USD and a UK cardholder buys in USD, their bank will charge the customer a currency conversion fee.

Below I have given a breakdown of different categories that payments fall into.


Domestic transaction: Card-based domestic transactions are transactions in which the card-issuing bank is located in the same country as the point of sale.

Intra-EEA transaction: Intra-EEA card-based transactions are transactions in which the card-issuing bank is located in a different country within the European Economic Area (EEA) than the point of sale where the card is used.


Intra non-EEA transaction: A card-based transaction is deemed an intra non-EEA transaction when the card issuing bank is located outside of the European Economic Area (EEA), but in Europe, and the point of sale where the card is used is located within the EEA, or vice versa.


Interregional transaction: Interregional card-based transactions are transactions in which the card-issuing bank is located outside of Europe and the point of sale is in Europe, or vice versa.


Definition of a domestic Visa card payment:

– The issuer and merchant are located in the same country.


Definition of a European Visa card payment:

– The issuer is located in country A within the European Region as defined by Visa.

– The merchant is located in country B within the European Region as defined by Visa.

– The issuer (country A) and merchant (country B) may never be in the same country.


Definition of an interregional Visa card payment:

– The issuer is located in a country outside the European Region as defined by Visa.

– The merchant is located in a country within the European Region as defined by Visa


Both Intra/Inter transactions incur a higher transaction processing fee (Merchant Service Charge), this is the fee set by the acquirer which you would pay in this instance.

 

[earthling500]

Both Intra/Inter transactions incur a higher processing fee (Merchant Service Charge) which you the merchant would pay in this instance. The only instance where your customers would have to pay an exchange rate is where your goods are listed in a currency which doesn’t match that of the cardholders/issuers region.

Domestic transaction: Card-based domestic transactions are transactions in which the card-issuing bank is located in the same country as the point of sale.

Intra-EEA transaction: Intra-EEA card-based transactions are transactions in which the card-issuing bank is located in a different country within the European Economic Area (EEA) than the point of sale where the card is used.

Both Intra/Inter transactions incur a higher transaction processing fee (Merchant Service Charge), this is the fee set by the acquirer which you would pay in this instance.

Hi Helen,


Thanks so much for your detailed reply. All my transactions will be billed in GBP to my customers.

So if I understand correctly from what you are saying, if my company is registered in BVI and my merchant account processor(MAP) is also within BVI, then my customers in UK that are paying me in GBP will not be incurring any foreign transaction fee that will appear on their statement?

Are you able to also advise if UK Banks would accept a BVI company for a merchant account? I have read on some posts in this forum that UK banks normally insist on a UK registered company, UK bank account and UK tax number as some of the pre-requisites.

Thanks again for your time

 

[Helen Wood]

Hi there, I think you have misunderstood - any transaction which is processed outside the region of the acquirer will incur additional fees e.g. a USA card through a UK acquirer, or a UK card through a US acquirer. I can't post a link yet, but do look up LibertyPay Limited and drop us a note through the website. My colleagues here are more than happy to help you properly.